By JOHN P. TRETBAR
Crude prices retreated on Monday, after a wild ride last week, followed by a missile attack on the world's largest crude terminal over the weekend. Crude prices surged above $71 a barrel in Asian trading after the attack in Saudi Arabia Sunday. Bloomberg said output appeared to be unaffected after the missiles and drones were intercepted.
The OPEC+ alliance decided to extend its current output cuts. And the Saudis say they will continue their additional, voluntary production limits. The announcements sent crude prices through the roof last week, with the U.S. and international benchmarks jumping more than three percent.
U.S. Crude prices continue their roller coaster ride. Benchmark prices topped $66 a barrel on Friday, marking a $4 gain on the week, after $3 losses the week before, and $3 gains the week before that. Prices were retreating Monday.
Kansas crude prices have spiked more than $5 in the last week. Kansas Common crude at CHS in McPherson starts the week at $56.25 per barrel after jumping more than $2 on Friday.
The rig count in Kansas is up 20 percent. Independent Oil & Gas Service reports four active drilling rigs in eastern Kansas, which is up one for the week, and 14 in western Kansas, which is up two. Operators are about to spud a new well on a lease in Ellis County and another in Stafford County. Baker Hughes reports 403 active drilling rigs nationwide as of Friday, an increase of one oil rig over the count last week. Texas was up five rigs, but Louisiana was down two, and both New Mexico and North Dakota were down one.
Independent Oil & Gas Service reports 13 newly completed wells in eastern Kansas last week and six west of Wichita. That's 116 completed wells across Kansas so far this year. We're seeing completion activity this week on five leases in Barton County, and one each in Ellis, Russell and Stafford counties.
Kansas regulators approved 22 new drilling permits last week, six in eastern Kansas and 16 west of Wichita, including two new permits in Russell County and two in Stafford County. So far this year, we've seen 122 permits for drilling at new locations in The Sunflower State.
National gasoline prices continued to increase, rising nine cents last week and 30 cents in the month of February. AAA says the average across the U.S. Thursday was just over $2.74 a gallon, the most expensive daily national average since August of 2019. Prices across Kansas over the last month have jumped more than 36 cents to a statewide average just over $2.57 a gallon. We spotted $2.54 at several locations in Hays Thursday and $2.57 across Great Bend. The cost of filling up a 15-gallon tank is up more than four dollars from a month ago and up more than eight dollars compared to six months ago.
A new federal report pegs Kansas crude oil production last year at just under 28 million barrels, or 76,000 barrels per day. Last year, most Kansas producers shut in most Kansas production due to low prices. That dropped annual production 17 percent from the year before, when total output in the Sunflower State reached nearly 34 million barrels, or about 93,000 barrels per day. The new totals from the U.S. Energy Information Administration show total U.S. output last year reached just 11.3 million barrels per day, down more than 940,000 barrels per day from the year before.
U.S. crude inventories rose by 12.6 million barrels last week to nearly 485 million barrels. That's about three percent above the five-year seasonal average.
U.S. crude production dropped below ten million barrels per day for the second week in a row, marking the first time that's happened since September. A year ago this week, operators set the all-time record for domestic production over 13 million barrels per day.
The government reported an increase in U.S. crude imports of nearly two million barrels per day last week, but said the four-week average remains nearly 13% below the same period last year.
Oil-by-rail totals for the week ending February 27 rose more than 2,000 tanker cars from the week before, but the totals are down more than 22% from a year ago. Oil-by-rail in Canada, which is widely expected to spike without additional pipeline capacity, was up more than 1,000 tanker cars last week, but remains 16% below the totals from a year ago. Total U.S. freight shipments by rail plummeted in February. The Association of American Railroads said in a statement that total rail traffic dipped more than four percent, despite strong numbers in grain and intermodal shipments. AAR said harsh winter weather hit wide swaths of the country, wreaking havoc on all forms of transportation, including rail.
The top trade group for the oil patch has also been among the top advocates against government action concerning climate change. But the American Petroleum Institute is now reportedly considering a move toward carbon pricing to limit emissions. The Chamber of Commerce embraced market-based emissions limits earlier this year, and several of API's largest members already support plans involving carbon taxes and rebates. Bloomberg reports the API is considering a draft policy statement which could receive a vote later this week.
The world’s largest oil company may soon dispose of some huge assets as a way of maintaining its $75 billion annual dividend payments. Almost all that goes to the Saudi government. That payout – the biggest of any listed company in the world – became harder to sustain after the coronavirus pandemic caused crude prices to plunge last year. Aramco is studying at least seven non-binding bids from companies interested in taking a stake in the crude giant's oil pipelines. Bloomberg reports infrastructure funds are flush with capital, and are looking for predictable investments. This sale could be one of the biggest infrastructure deals this year.
After years of rising output turned Canada into the world’s fourth-largest crude producer, expansion projects there have nearly halted on the heels of two market crashes since 2014. Bloomberg reports oil sands producers in Western Canada next month will conduct major maintenance and overhauls, idling nearly half a million barrels per day of production.
It started some weeks back when the sporting goods company The North Face refused to fill an order for 400 jackets from an oil and gas company. The Colorado firm reportedly didn’t want to be associated with an industry that doesn’t meet its brand standards. As we pointed out then, the jackets, and almost every else The North Face sells, are made with nylon, polyester and polyurethane, all of which come from petroleum. So, the Colorado Oil and Gas Association decided to have some fun with the situation. It bestowed its first-ever “Extraordinary Customer Award” on The North Face, saying it appreciates the company for its abundant use of oil and gas.